AsianFin -- U.S. President Donald Trump on Thursday signed an executive order to implement a bilateral agreement and lower the sweeping tariffs on Japan to 15%, including the auto levies, which have already hit a pillar of Japanese economy hard.
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Trump in the order said he determined to implement the U.S.-Japan agreement and asked all executive departments and agencies to implement the order. That marks a move to impose a maximum 15% tariffs on most Japanese exports, and avoid the tariff overlapping when the Trump administration is levying sectoral tariffs.
“Under the Agreement, the United States will apply a baseline 15 percent tariff on nearly all Japanese imports entering the United States, alongside separate sector-specific treatment for automobiles and automobile parts; aerospace products; generic pharmaceuticals; and natural resources that are not naturally available or produced in the United States, “ said to the executive order released by the White House.
The agreement effectively cut all Trump’s new tariffs on Japan this year to a rate of 15%. Prior to the new U.S. reciprocal tariffs effective on August 7, Japan faced the 10% worldwide baseline tariffs as well as a 25% tariff on automobiles and auto parts, and a 50% tariff on steel and aluminum. The order on Thursday made it clear that all tariffs on automobile and auto parts imported from Japan shall be 15%.
In exchange, Japan under the agreement will offer a wide range of American goods “breakthrough openings in market access”, according to the order. It noted the Japanese government is working toward an expedited implementation of a 75% increase of United States rice procurements within the Minimum Access rice scheme and purchases of United States agricultural goods, including corn, soybeans, fertilizer, bioethanol, as well as other United States products, in amounts totaling $8 billion per year.
Japan has also agreed to invest $550 billion in the U.S., and the investment will be selected by Washington, the order said.
Trump on July 22 announced a “massive” trade deal with Japan, involving $550 billion in investments and a 15% reciprocal tariff on Japanese goods. But the deal had yet to be formalized as Washington and Tokyo haggled over its terms.
Trump in his social media post on July 22 said “Japan will invest, at my direction, $550 Billion Dollars into the United States, which will receive 90% of the Profits. ” But Japan on July 26 confirmed only a small part, just 1% to 2%, of the $550 billion deal with the US will be actual investment. Most of the money will be in the form of loans, Akazawa said.
Japanese Prime Minister Shigeru Ishiba on July 23 told reporters the 15% rate was the lowest so far among countries that have a trade surplus with the U.S., thus “ we have achieved the greatest results.” He also said Japan’s auto exports to U.S. will face a 15% tariff rate, down from the current 25% levied across countries.
A senior Japaneses ruling party official on August 7 said Japan faced overlapping tariffs, where a new 15% levy is added to existing import taxes, even though it had expected to be given an exemption stripping out the old tariffs. Japan’s chief negotiator Ryosei Akazawa later that day said the U.S. government confirmed that it would end stacking of universal tariffs on Japan and take steps to cut auto duties.
The U.S. officials during a meeting explained they would amend the presidential order, so as to refund any overpaid levies since August 7, but both sides have not agreed on timeline for the implementation, Akazawa said.
Akazawa in late August canceled his trip to the U.S. for discussion of tariff measures from August 28 to 30. The trip was canceled because “ it became apparent that certain points required further technical discussion” during the coordination with the U.S., said Japan’s Chief Cabinet Secretary Yoshimasa Hayashi.
